Old-Age Support and Protection

in China
Zhao Yaohui, Lei Xiaoyan
NSD, PKU
May 2010

The views expressed in this paper are the views of the author(s) and do not necessarily reflect the views
or policies of the Asian Development Bank (ADB), or its Board of Directors or the governments they
represent. ADB does not guarantee the source, originality, accuracy, completeness or reliability of any
statement, information, data, finding, interpretation, advice, opinion, or view presented, nor does it make
any representation concerning the same.
 Motivation

• The old-age support system is moving away

from family support to societal support
• Present evidence of this policy shift
• Explain reasons behind this shift
• Identify problems in the current system design
• Implications for future family relations?

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 Questions to Answer
• How has the old-age support and
protection evolved in China?
– Current status
– Past
• How do we explain the changes that have
occurred?
• What problems exist in the current system?
• How does the future hold for China?

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The Shift in Old-Age Support Policy
• Present key elements of current old-age support
system
– By urban-rural
– Old-age pension; minimum living guarantee; health
insurance; other government programs targeting the
elderly (one-child policy compensation, etc.)
• Elements of the old-age support at the beginning
of economic reform
– Same classifications
• Include statistics as much as possible
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Driving Force Behind the Shift
• Family less reliable for old-age support
– The Demographic transition
• The number of children declining
• The number of the elderly growing
– Migration - Children increasingly moving away
from parents
• Social tolerance of poverty declining
• Political economy – Elderly becoming
more politically powerful Next PPT
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 Current Problems
• Sustainability
• Fragmentation by urban-rural and region
– Lack of program portability inhibits family
support (Social security, NCMS)
• Highly unequal program generosity
– Urban-rural; coastal-inland
• Management of pension programs

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 Future Implications
• Can social support be adequate in making
up for losses of family support?
• Does social support crowd out family
support?
• Will fertility continue to decline with
dwindling importance of family in old-age
support?
• What should we do to provide enough
protection against poverty in old age?
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 A Report of Ongoing Work

• Historically evolutions

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Policy Changes - Urban Pension
• Established in 1951
• Ceased during the Cultural Revolution
• 1978 Amendments
• Introduction of individual contribution in the late 1980’s
• 1991 reform of pension system (joint finance by the state,
enterprise and the individuals)
• 1992 expansion to COE
• Reform after mid-1990s :construction of social basic
pillar, enlargement of pension pools, expansion of
insurance coverage

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Policy Changes - Urban Pension
• 1997 plan to establish a unified nationwide pension
insurance system, coverage broaden afterwards
• 1999 expansion to FIE, POE and other enterprises
• 2002 cover urban informal workers
• Pilots: started from 2001 in Liaoning, 2004 in Jilin and
Helongjiang, then 2006 expanded to Tianjin, Shanghai,
Shanxi, Shandong, Henan, Hubei, Hunan and Xinjiang

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 200 Persons Covered by Old-age Urban Pension Insurance
Participants (Million)
50 1000 150

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Year

Total Employee
Retiree
Source: National Bureau of Statistics 2009
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Policy Changes - Rural Pension
• Before 1992, only assisted Five Guarantees (Wubao)
• 1992 “Basic program for rural social security insurance
at county level”
• Rapid development after 1992, reached 82.8 million
insurants in 1997
• After 1998, stopped developing
• 1999 decision to rectify the existing business, stop
accepting new business and encourage movement
towards commercial insurance
• 2009 started pilot of the New Rural Social Pension
Insurance Program, plan to cover all rural by 2020
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 Coverage of Rural Old-age Pension Insurance
80
Participants (Million)
70
60
50

1994 1996 1998 2000 2002 2004 2006 2008

Year
Source:Before 1998:Statistic Communiques of the Ministry of Civil Affairs;After 1998:National Bureau of Statistics
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Current Policy - Urban Pension

• Rules
• Eligibility
• Account management
• Transfer rule
• …
• Statistics
• Total coverage
• Average replacement rate
• …
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Current Policy - Rural Pension

• Current rules:
• Eligibility
• Premium
• Amount of pension
• …
• Statistics:
• Total coverage
• Average replacement rate
• …
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 Other Policies
• Minimum living guarantee
• Health insurance
• Other government programs targeting the elderly (one-
child policy compensation, etc.)

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 Future work
• Complete analysis on the current policies
• Conform our expectation on the existing problems
• Provide insights into the policy implications

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Comments are extremely welcome!

Thank you!

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